Health Spending Up 5.5% in August

October 14, 2016 11:00 AM Eastern Daylight Time

ANN ARBOR, Mich.--(BUSINESS WIRE)--At a $3.4 trillion annual rate, national health spending in August 2016
was 5.5% higher than health spending in August 2015. Annualized growth
for the first 8 months of 2016 is now 5.6%, revised upward due to the
September Quarterly Services Survey (QSS) which showed unexpectedly high
growth in spending on health care services in the second quarter.
Spending on prescription drugs grew by only 4.3% in August, despite
higher growth in prescription drug prices.

In August 2016, health care prices were 1.9% higher than in August 2015.
While only a 0.2 increase from July, prices are at their highest rate
since October 2012. After hitting the December 2015 all-time low of
0.9%, price growth has roughly doubled, and is on the cusp of rising to
a more “normal” 2% rate—or higher. Yet, the two principal price
components, hospitals and physicians, are growing remarkably slowly:
0.9% for the former and only 0.1% for the latter. At 6.3% growth,
prescription drug prices are at their highest level since December 2014.

Health care added 32,700 jobs in September, less than the 12-month
average of 37,000 jobs, but up from last month’s low August reading of
22,000. Hospital hiring grew by 7,000 jobs compared to its 12-month
average of 13,000. Health jobs grew 2.9% year over year while non-health
jobs grew 1.6%, causing the health share of total employment to reach a
new all-time high of 10.8%.

“We have expected health spending growth to slow in 2016 in response to
the slowdown in expanded coverage,” said Charles Roehrig, founding
director of the Center. “However, the September QSS suggests that
spending on health care services in the first half of 2016 has been
growing at about the same rate as in 2015. It took a while for expanded
coverage to push spending up, so perhaps we must wait a while longer for
the slowdown in expanded coverage to be reflected in slower spending
growth. We await QSS data for the third quarter which will be released
on December 8th.”